The good news for those hoping to see online casinos spread far and wide in America? Rhode Island legalized iCasino this year, becoming the seventh state to do so.
The bad news for consumers? It’s a one-horse state, with Bally’s being the only operator allowed to offer its product, with an expected launch in April 2024.
The potential worse news for various parties? The law is written so that if Rhode Island’s lottery suffers a shortfall, Bally’s is on the hook to cover the loss.
According to the law, if annual lottery revenue is down a million dollars or less, Bally’s has to cover the entirety of the decrease. If lottery revenue is down between $1 million and $2 million, Bally’s has to cover 50% of that amount beyond the first million.
“As far as the language itself, this is definitely the first time we’ve seen this kind of explicit protection for the lottery or any incumbent gambling operator,” said Becca Giden, the director of policy for Eilers & Krejcik Gaming. “We certainly have not seen this in online casino, not in sports betting, or any gambling legislation.”
Jeff Ifrah, the founder and general counsel of iDEAGrowth, could barely believe Bally’s allowed this to happen.
“I have no idea why Bally’s or anyone would go along with a provision like this, other than the fact someone feels so strongly that there is no cannibalization and they view this particular language as risk-free,” Ifrah said. “But it is not a good precedent for other states to look at. Not something we’d like to be out there.”
Giden does note, however, that Rhode Island is a bit of a special case. For starters, the Rhode Island Lottery oversees sports betting and iCasino, so there’s a vested interest in making sure there’s no cannibalization. But perhaps more importantly, Rhode Island is one of only 11 states where there is iLottery.
“We think that would be the closest candidate for some kind of negative impact from online casino,” Giden said. “If online casino is activated in a state that only has retail lottery, the crossover is a little less clear than somebody who has been playing an online scratch ticket and is now offered the opportunity to play an online slot.”
Michigan is one of the few other states that has both iLottery and iCasino, and “as far as we can tell,” Giden said, “the activation of iLottery and online casino in Michigan has basically grown both of these markets.”
Lawmakers offering protection
Both Giden and Ifrah don’t expect other states to follow in the exact footsteps of Rhode Island, but Giden did say there has been, and will continue to be, more “protectionist” language in gambling bills going forward.
She points to Illinois, and its online casino bill (SB1656) proposed this year, which sought to protect workers at land-based casinos.
“The bill states an online casino licensee would not be able to renew their license if they had reduced the size of their land-based workforce by 25% or more since February of 2020,” Giden said. “So it’s not exactly the same, but it did feel to me the same kind of protection against cannibalization, and here I assume the lawmakers are trying to protect the economic development interests of the land-based casinos and obviously the people who work for them.”
She also noted Ohio’s sports betting legislation required that any operator who applied for a retail permit would have to establish an in-state office with a minimum number of Ohio-based employees.
“States are being more explicit in protecting land-based assets,” Giden said. “I definitely see these types of things being proposed increasingly, but whether or not it’s able to gain traction I’m a little more bearish on. Lottery runs all the gambling in Rhode Island, and has an increased lobbying position as a result.”
‘I’m sure they’ve been doing the math’
Representatives for Bally’s declined to discuss the language of the bill, only saying through a spokesperson that “the addition of iGaming will only continue to generate positive returns for Rhode Island and our stakeholders” while thanking the politicians who passed the bill.
“It’s a little bit baffling, but at the end of the day, I’m sure Bally’s has done the calculations,” Giden said. “I’m sure they’ve been doing the math throughout this process.”
Ifrah echoed that sentiment, and went back to the dawn of legalized iCasino to make his point.
“The first year that New Jersey launched iGaming, the CFO of Borgata went on CNBC and said 95 percent of their online customers were new. And we’ve seen similar statistics, a tremendous lack of overlap,” he said. “Essentially these online customers are new customers, and maybe that’s why Bally’s didn’t see much risk in a legislative proposal like this.
“But it’s still not a good thing to have out there. We certainly wouldn’t want to see this happen in other states.”
Photo: Getty Images
